Endava Trading Higher After Topping Q4 Consensus Views

Technology service provider Endava NYSE: DAVA advanced in early trade Tuesday after the company reported better-than-expected fiscal fourth-quarter results.

The company specializes in assisting clients in various verticals, including financial services and payments, technology, media, logistics, retail, and healthcare.

Shares gapped up nearly 7% at the open, boosted by earnings of $0.57 per share on revenue of $184.6 million. Those numbers represent year-over-year growth of 104% and 65%, respectively.

Analysts had expected earnings of $0.34 per share on revenue of $180.50 million.

The company has a long history of beating views on both the top and bottom lines, according to data compiled by MarketBeat.

Some investors were spooked last week, when the company delayed its earnings report, originally scheduled for September 23. News like that may signal something wrong at the company, although there was no indication of that in today's report.

It may also mean that a large, material announcement is around the corner. However, the only announcement Endava made Tuesday concerned the company's We Care sustainability report. While important for the growing number of investors with concerns about sustainability, it was hardly the kind of material announcement with the potential to move the stock price significantly in either direction.

The report is intended to give company stakeholders "a comprehensive view of its achievements and priorities in relation to Environmental, Social, and Governance matters."

In its earnings release, the company highlighted several developments in the quarter and the fiscal year.

• Top 10 clients accounted for 35% of revenue in FY2021, compared to 38% of revenue in the prior year.
• By geographic region, 31% of revenue was generated in North America, 24% in Europe, 42% was generated in the United Kingdom and 3% was generated in the rest of the world in FY2021. This compares to 29% in North America, 24% in Europe, 44% in the United Kingdom, and 3% in the rest of the world in the prior year.
• By industry vertical, 51% of revenue was generated from Payments and Financial Services, 27% from Technology, Media and Telecommunications, and 22% from Other. This compares to 53% from Payments and Financial Services, 26% from TMT and 21% from Other in the prior year.

Endava also issued guidance for the first quarter of fiscal 2022, as well as for the full year. However, the company used very deliberate language to emphasize that many pandemic-related uncertainties remain.

That's been typical across the board in recent quarters, as companies from all industries hedge their forecasts a bit, given widespread shortages and bottlenecks. For a company like Endava, which is a service provider, headwinds affecting its customers could have an effect on its results.

"At this time, the general economic environment remains fluid and it continues to be challenging to anticipate the ultimate full scope and duration of the impact of the COVID-19 pandemic," the company said.

For the first quarter, the company expects revenue in the range of $193.68 million to $196.39 million.

It should be noted that Endava releases results in British pounds. It added that the current revenue forecast represents "constant currency revenue growth of between 56% and 58%."

Constant currencies are exchange rates that can smooth the effects of currency fluctuations for financial statements. It's a way of filtering out noise related to foreign currency ups and downs.

Endava expects adjusted diluted EPS to be in the range of a little over $0.57 per share to a little under $0.60 per share.

For the full year, the company expects revenue will be in the range of $823.08 million to $832.50 million. The company specified that this forecast represents constant currency growth between 38% and 40%.

Endava expects full-year adjusted diluted EPS to be in the range of $2.179 to $2.26 per share.

Those forecasts assume the exchange rates at the end of August. when the exchange rate was 1 British Pound to 1.38 U.S. dollars and 1.17 euros.

Looking at Endava's chart, you'll see that the stock has been correcting below its August 19 high of $143.50. So far, it's corrected about 21%, finding support well above the 200-day line, which is a good sign. That means there's been some profit-taking, but not an all-out rush to get out of the stock quickly.

The stock fell 6.27% on September 22, as the company announced it was delaying its earnings announcement. With Tuesday's better-than-expected report, it's made up some of those gains.